Microsoft Q2 results are a mixed bag

Windows licensing sales down, Windows Phone down, cloud up.

Microsoft’s latest quarterly report was a mixed bag, but closely matched analyst expectations overall.

The report for Q2 FY2015 (Q4 CY2014) revealed the vendor achieved $26.5bn in revenue, with operating income of $7.8bn.

On the B2B end, overall sales were up 5% year-over-year. Server products and services revenue increased by 9% and Windows volume licensing revenue was up by 3%; but the real star of the show was commercial cloud revenue which grew by 114%.

Research analyst, Kelsey Mason, said that despite the strong cloud revenue, Microsoft’s needed to keep its bread and butter services in the game.

“While moving customers to the cloud remains a priority, Microsoft realizes that hybrid IT will be the end-game for many customers,” Mason said. “As a result, preventing defection from core, traditional software businesses such as Windows and SQL Server is a critical piece to Microsoft’s strategy in becoming the productivity and platform company for the cloud-first, mobile-first world”. TBR believes Microsoft’s more active approach to increasing share of wallet and driving renewals will help the company succeed in this transformation.”

In the consumer space, revenue from Windows licensing fell 13% year-over-year, although this can partly be explained by the upgrade rush following XP end-of-life last year. Office 365 subscribers hit 9.2 million, 30% up on the previous quarter. Sales of Surface tablets grew by 24% on the previous quarter to $1.1bn. While this is a healthy jump, it’s still a drop in the ocean of the total market value.

Windows Phone revenue was down a massive 61% year-over-year. Microsoft claims this is due to the absorption of Nokia, though its share of smartphone market remains at around the 5% mark.

Microsoft also announced a $30bn stock buyback programme to repurchase its own shares over the next two years.



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